One of the challenges in making a strategic decision to adopt Build-to-Order (BTO) operating practices is that there appears to be no need, since many manufacturers are realizing some gains through incremental continuous improvement of their existing JIT operating method. For the most part, that's correct if your market place is fairly stable and you enjoy significant market share.

However, in volatile, highly competitive markets, anything short of an all encompassing shift to rapid Build-to-Order produces only incremental improvements that will not be enough to satisfy customers' demands for very long. Supply chains increasingly have to dramatically reduce their costs to survive. Making necessary cost reductions of 30% or more will force the challenge of such basic manufacturing dogma as:

1. Efficient mass production
2. Standardized and predictable shop floor control
3. An insistence by some manufacturers that they are in the business of "making" instead of "branding".

These long held practices caused resistance to the Toyota Production System's message, at first, and later in many cases diluted it to something nearly unrecognizable from its original intent. Unfortunately both efficient mass production and standardized, predictable shop floor control are by-products of a successful Lean focus.

The original concept of the Toyota Production System was to have the ability to produce one as efficiently as producing 1000. It advocated a pull system whereby the customer "pulled" his/her product from the OEM. However, the automotive industry is a push industry, meaning cars are built and "pushed" onto dealers' lots. Lean got translated as "efficient capacity utilization" and consequently $80 billion of inventory sit on the dealers' lots for an average of nearly 80 days.

Those of us who criticize the emphasis on lean for diluting the ability to make the substantial bottom-line improvements are ourselves sometimes criticized for our emphasis on BTO. To set the record straight, BTO and lean coexist very nicely as long as being lean doesn't compromise the company's ability to be flexible. The problem is that many manufacturers have made flexibility tradeoffs to maintain their ability to produce in an efficient manner, much as they learned on the knee of Henry Ford.

Perhaps the most insidious of these tradeoffs is efficient mass production. You see, manufacturers learned about mass production at the same time they learned about economies of scale. If you can spread large investments over large quantities produced, the investment per unit goes down. There's nothing wrong with the concept of economies of scale either unless it's misapplied.

While economies of scale say that large quantities of production are required to pay for large investments, it doesn't necessarily hold that large investments are required. Many manufacturers have over invested in capacity because of the operating system they use. Using the automotive industry as an example, there's currently almost twice as much capacity as is necessary to meet demand. Still, OEMs continue to pump out cars to utilize capacity efficiently and push them to the dealers while needing to provide rebates and other incentives worth over $30 billion to induce consumers to buy them.

Another challenge is whether the customer will pay more for a custom built product. No one can say for certain. The most likely answer is that they won't. But true customization adds a level of differentiation that is currently met most often by lower and lower prices. Customers, when faced with two choices of equal price, will select the one that meets their expectations the best. Clearly, if a company provides a consumer what he/she wants, at the same price as a competitor but at a lower cost to produce, they will sell more and make more money. BTO provides the opportunity for manufacturers to reduce operating costs, inventory costs, and plant capacity costs.

Two friends, Bill and Bob, are working on a high-rise construction site; Bill on the 20th floor, Bob on the 5th. Bill slips and falls. Bob seeing his friend but being unable to grab him can only shout, "Bill, you O.K?" Bill yells out, "So far!" as he zooms past. Many American manufacturers, who so far are following the same operating strategy they've used for the last 20 years or so, will find manufacturing dramatically different in the near future and BTO could represent a softer landing alternative for them than Bill will find.